Equitable Acceptance has apparently taken the position they are nothing more than a contract financing company for the student loan assistance industry. They also state they are involved in other industries as well.
But in the student loan assistance space, Equitable Acceptance has seemingly enabled fly-by-night student loan debt relief companies to pop up, make sales, pocket cash, and vanish. When the consumer gets left by the side of the Road, Equitable Acceptance continues to collect on service contracts for vanished companies.
An FTC lawsuit said, “During the relevant time period, the Corporate Debt Relief Defendants collected their fee of over $1,300 from their customers in one of two ways: (1) by way of the loan that EAC extended to the Corporate Debt Relief Defendants’ customers; and (2) directly, through what the Corporate Debt Relief Defendants referred to as “cash” or “trust” deals. Under both payment methods, the Corporate Debt Relief Defendants requested or received payment of their fee in advance of completing their debt relief service.”
Equitable Acceptance Smoking Gun
Equitable Acceptance Corporation (EAC) may have been able to pass off the unhappy consumers as a fluke but the complaint filed by the FTC says Equitable Acceptance intentionally sought out sellers of student loan assistance services and “vetted” them.
“Sometime in 2015, EAC hired Defendant Brad Hunt to locate and investigate other student debt relief companies with which EAC could do business. Hunt provided training and business materials to these companies regarding sales processes and proper disclosures and received a commission for each consumer that entered into an EAC Credit Plan.
In late 2015, EAC started entering into relationships with other student loan relief dealers, offering the EAC Credit Plan to their customers in the same fashion as it had been doing business with the Corporate Debt Relief Defendants throughout 2015. Hunt introduced several dealers to EAC.
By this time, EAC knew or should have known that the sales model that each of the dealers would follow was deceptive. EAC had already received consumer complaints regarding deceptive sales practices on the part of one or more of the Corporate Debt Relief Defendants. Despite these complaints, EAC relied on Hunt as the “industry expert” to vet and to train new dealers. Moreover, EAC failed to conduct an independent review of Hunt’s training or the new dealers’ sales practices.
EAC Assistance to the Corporate Debt Relief Defendants’ Deceptive Scheme Was Substantial
The assistance that EAC provided to the Corporate Debt Relief Defendants’ deceptive telemarketing operations was substantial and allowed the Corporate Debt Relief Defendants to grow over the relevant time period. The Corporate Debt Relief Defendants viewed the EAC partnership as critical to their business because the EAC-loan model essentially provided them with immediate cash to support operations, without requiring the Corporate Debt Relief Defendants to directly collect fees from their customers. As an additional benefit to the Corporate Debt Relief Defendants, EAC handled all collections and related issues for payments from consumers who obtained financing from EAC. In addition, shifting consumers’ payment obligations to EAC allowed the Corporate Debt Relief Defendants to deflect consumer complaints and cancellation requests by pointing consumers to EAC to seek resolution.
EAC Ignored Red Flags
After the start of its business relationship with the Corporate Debt Relief Defendants, EAC received consumer complaints about one or more of these commonly owned Corporate Debt Relief Defendants and about other student loan relief dealers with which EAC did business. EAC received complaints directly from consumers, as well as complaints that were forwarded from the Better Business Bureau (BBB) and the Bureau of Consumer Financial Protection. The complaints claimed, among other things, that one or more of the Corporate Debt Relief Defendants or other dealers engaged in misleading sales tactics and that the consumer had not authorized the EAC loan.
The BBB had also received numerous complaints about EAC from customers of one or more of the Corporate Debt Relief Defendants. The content and volume of complaints that the BBB received against student loan debt relief companies with which EAC did business became such an issue that, in August 2016, the Minnesota BBB contacted EAC and alerted EAC to the high volume of consumer complaints it had received and the apparently deceptive nature of their sales tactics. Despite these consumer complaints and the BBB’s warning, EAC continued to assist the Corporate Debt Relief Defendants by extending financing to new customers of the Corporate Debt Relief Defendants. EAC continued to finance these sales up until the time Hunt and Lucero’s company, SAT, stopped making direct sales to consumers in 2017. EAC has continued to collect monthly payments from Corporate Debt Relief Defendants’ customers who have many months left on their 36- to 48 month loan terms.
EAC never reviewed or asked to see the sales scripts that any of the Corporate Debt Relief Defendants used. Nor did EAC ever listen to or even ask any of the Corporate Debt Relief Defendants for recordings of their sales calls. Instead, EAC continued to work with the Debt Relief Defendants to expand their businesses.”
Consumers’ Efforts to Cancel or Obtain Refunds
A number of customers of the Corporate Debt Relief Defendants have stated that the specific Corporate Debt Relief Defendant from which they purchased the service and/or EAC have responded to their cancellation or refund requests with threats to send their accounts to collections, or to report negative information to the credit bureaus. In numerous instances, the Corporate Debt Relief Defendants and EAC canceled consumers’ obligations only after those consumers filed a complaint with law enforcement or consumer protection agencies. Other consumers have continued to pay EAC out of concern that negative information will be reported on their accounts to the credit bureaus.”
The suit also stated the circle consumers were trapped in with this outside financing agreement, “EAC’s policy was not to let consumers out of their payment obligation, advising consumers who wanted to cancel that they were outside of the three-day cancellation period, and often directing these consumers back to the Corporate Debt Relief Defendant who had sold the debt relief services to the consumer. The Corporate Debt Relief Defendants often advised consumers who wanted to cancel that they owed EAC and that the Corporate Debt Relief Defendant could not cancel that obligation.”
On face value Equitable Acceptance appears to be a factoring company, paying less than face value for contracts and then holding the consumers to repay them even though the services may have not been delivered.
In a more macro view, companies filling the role Equitable Acceptance did just appeared to enable the underlying bad behavior of the student loan assistance companies.
The student loan assistance industry is an outcrop of the past debt settlement industry where fast sales and magical promises where the demand for the day and the delivery of the actual services was barely a point to consider.
The result of the action put forward by the State of Minnesota and the FTC, Equitable Acceptance “agreed to be banned from the debt relief business.”
Today the Federal Trade Commission jumped into the mess.
More on the Lawsuit
Defendants allegedly bilked millions out of consumers by charging illegal upfront fees and falsely promising to lower or even eliminate consumers’ loan payments or balances
“The Federal Trade Commission charged the operators of two similar student loan debt relief schemes, and a financing company that assisted them, with bilking millions of dollars from consumers.
The defendants allegedly charged illegal upfront fees that they led consumers to believe went towards consumers’ student loans, and falsely promised that their services would permanently lower or even eliminate consumers’ loan payments or balances. The defendants also signed customers up for high-interest loans to pay the fees without making required disclosures.
In one action, brought jointly by the FTC and the State of Minnesota, the student debt relief company and the financing company involved agreed to be banned from the debt relief business in order to settle the charges. In the second action, the financing company has agreed to settle but the FTC’s litigation continues against the student debt relief defendants.
“Working with our law enforcement partners across the country, we have brought dozens of cases against debt relief scams like these,” said Andrew Smith, Director of the FTC’s Bureau of Consumer Protection. “The difference here is that a state-licensed finance company was knowingly participating in the scheme by financing the thousands of dollars in illegal fees that these scammers tricked consumers into paying. This is yet another example of how we are holding accountable companies that facilitate fraud by others.”
According to the FTC’s complaint against Manhattan Beach Ventures and Equitable Acceptance Corporation, MBV deceptively promoted payment reduction programs to consumers looking for help with their student loans. MBV charged consumers up to $1,400 and funneled them into financing this fee through a high-interest loan with third-party financier Equitable Acceptance Corporation, another defendant in the scheme. The State of Minnesota is a co-plaintiff in the action against MBV.
In its complaint against Student Advocates Team and Equitable Acceptance Corporation, the FTC alleges that a different set of defendants engaged in deceptive and abusive practices for several years that were similar to those alleged against MBV, charging consumers up to $1,400 and also enrolling their customers in EAC’s financing program.
The FTC alleges that the defendants in both cases violated the FTC Act and provisions of the Telemarketing Sales Rule (TSR). EAC is charged in both cases with violating the assisting and facilitating provision of the TSR by providing substantial assistance to MBV and Student Advocates when it knew, or consciously avoided knowing, that the defendants were engaged in deceptive and abusive telemarketing practices. EAC is also charged in both cases with violating the Truth in Lending Act by failing to clearly and conspicuously disclose in writing necessary information concerning the closed-end credit that it offered.
The stipulated order with MBV and its owners bans these defendants from selling any kind of debt relief products or services, making unsubstantiated claims about financial products and services, and also from making material misrepresentations about any other kind of product or service. It also imposes a $4.2 million judgment, in which all but $156,000 is suspended based on inability to pay. MBV is required to notify its customers that none of their prior payments have gone towards a Department of Education repayment program or towards their student loans.
Under the stipulated orders against EAC in both the MBV matter and the Student Advocates matter, EAC is required to pay nearly $28 million, all but $1 million of which is suspended based on inability to pay.
EAC is also required to relinquish its right to collect on any outstanding balances from current or former customers of MBV and Student Advocates. EAC must also notify these customers that it will not collect further payments from them.
In the MBV matter, the defendants are Manhattan Beach Venture (also doing business as Student Loan Relief Department); Equitable Acceptance Corporation; and individuals Christopher Lyell and Bradley Hansen.
In the Student Advocates matter, the defendants are Student Advocates Team, LLC; Progress Advocates Group, LLC; Student Advocates Group, LLC; Assurance Solution Services, LLC; Equitable Acceptance Corporation; and individuals Bradley Hunt and Sean Lucero.” – Source
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